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Avista Announces Partial Settlement of Oregon Rate Case

Zacks Equity Research

Avista Corporation AVA and all of the parties to its natural gas general rate case filing have reached an agreement on certain issues. Consequently, a partial settlement agreement has been filed with the Public Utility Commission of Oregon (PUC) for its consideration.

The partial settlement includes agreement among the parties on the cost of capital and certain smaller adjustments related to employee benefits and other expenses. The remaining issues, which include capital investments for infrastructure improvement and the recovery of increased utility operating costs, will be resolved gradually.

The partial settlement reduced Avista’s original revenue request of $6.7 million to $5.36 million. Rate hikes at regular intervals are quite essential for the utilities to recoup the amount invested in infrastructure upgrades and continue with necessary investments to improve the facilities for better serving customers.

Long-Term Capital Plans

Avista has been investing consistently to improve the quality of services that it provides to electric and natural gas customers. After spending $428 million in 2018, the company aims to invest $1.62 billion in the 2019-2022 time period. Effective regulatory outcomes in its service territories allow Avista to recoup investments.

These investments will help the company to achieve the objective of serving customers with 100% clean electricity by 2045.

Rising Natural Gas Usage in the United States

Natural gas, as a primary source of energy, is gaining popularity in the United States due to its clean burning nature and wide availability. Per a report from the U.S. Energy Information Administration (EIA), U.S. dry natural gas production will average 90.6 billion cubic feet per day (Bcf/d) in 2019, up 7.2 Bcf/d from 2018. Production volumes will further increase in 2020 and are expected to average 91.8 Bcf/d.

The increasing usage of natural gas will allow the companies to benefit either from the production of natural gas or transportation of the same to end users like Avista.

Price Performance

Shares of Avista have outperformed its industry in the past three months.

Zacks Rank & Key Picks

Currently, Avista has a Zacks Rank #4 (Sell). Some better-ranked stocks in the same space are Xcel Energy. XEL, Entergy Corporation ETR and DTE Energy Company DTE, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Xcel Energy, Entergy and DTE Energy delivered average positive earnings surprise of 2.15%, 21.88% and 12.24%, respectively, in the last four quarters. Xcel Energy, Entergy and DTE Energy’s Zacks Consensus Estimate for 2019 has moved up 0.4%, 0.4% and 0.3%, respectively, in the past 60 days.

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